Results presentation For six months ended 30 September 2018 and update of portfolio to 31 December 2018
A brief history of Stenprop 1995 - 2014 2017 2018 In 1995, Paul Arenson joins the Stenham Stenprop acquires the industrials.co.uk In May 2018 Stenprop converts to a UK - Group with the remit to establish a property portfolio of 25 MLI estates for £127m from REIT fund management business In June 2018 Stenprop lists on the LSE Morgan Stanley and C2 Capital JV. - It simultaneously acquires C2 Capital and Patsy Watson joins as Finance Director in its management platform founded by By end of December 2018 Stenprop owned 2007. Property under management at Julian Carey 59 MLI estates comprising over 40% of the Stenham Property exceeds £2bn portfolio and LTV was 47% *. Paul and Patsy take management control of Julian Carey joins the Board - Three Central London offices sold: a vehicle listed on the JSE , with an existing - Pilgrim Street £80m portfolio of £27m, which is re-named - Argyll Street 50% share of £83m Following the acquisition, MLI comprised Stenprop. Stenham Property investors inject - Euston House exchanged £95m 16% of the portfolio over £600m of assets into Stenprop for - Germany shares - Aldi supermarket portfolio sold for £32m Stenprop announces strategic plans to: - transition its business into a 100% The Stenham Property management - Almost all of the third party managed assets focused UK MLI business company with over £800m of third party sold reduce overall leverage to below 40% owned property under management is - simultaneously sold to Stenprop. Paul list on the LSE - Arenson is appointed CEO and Patsy convert to a REIT - Watson, CFO - dispose of all third party management property - pay dividends covered by earnings from owned property * After the conclusion of the sale of Euston House (expected end March 2019), LTV is anticipated to fall below 45%, with a target of less than 40% by end March 2020. 2
Portfolio Overview – Total Assets £698m UK portfolio: £416m (60%) £249m MLI – 59 estates across the UK* £80m Euston House (book value), contract exchanged for sale at £95m, completion anticipated March 2019 £60m Trafalgar Court, Guernsey, currently let to Northern Trust for 10 years £13m in four single let industrial units £8m in a high-tech Industrial building in Reading £6m in three retail units Dana Trading Estate, United Kingdom German portfolio: £264m (38%) £136m Bleichenhof – Core Hamburg city centre building comprising offices, retail and parking £68m comprised of three daily needs, food-anchored centres in central Berlin £25m in five retail warehouses £35m in four care homes Bleichenhof, Hamburg We also have one leisure centre remaining in Lugano, Switzerland, with a value of £18m, which will be sold, comprising 2% of the portfolio All of these non-MLI assets are performing to business plan and will be sold over the next few years as Stenprop transitions to 100% MLI * MLI comprises 36% of the portfolio and will increase to 40% of the portfolio when the Euston House sale completes. 3
Transition Plan – to 31 March 2020 Objectives for FY March 2020 Progress made in FY March 2019 MLI to comprise at lease 60% of total portfolio. Requires MLI increased from 20% of portfolio to over 40% of purchases of £100m of MLI and sales of £140m of non- portfolio as a result of £98m of MLI acquisitions and MLI. £248m of non-MLI sales (including Euston House which Sales and Purchases has exchanged but not yet completed) Manage timings of acquisitions and disposals during transition to minimise cash drag and maintain dividend All sales were at valuation or better. Currently 47.3%. Expected to be no more than 45% once Overall debt to reduce to no more than 40% LTV Euston proceeds are received and partially used to Leverage Utilise revolving credit facility to balance financing deleverage, with the balance used for further requirements of purchases before sales acquisitions. Smart Lease launched and 1 st phase of online leasing platform in place. Focus on building out a scalable MLI focused operating platform Industrials.co.uk relaunched and new tenant marketing Operating Platform strategy actioned Embrace further technological solutions to improve operating efficiency Further roll-out of tech platform underway, including tenant portal 4
The MLI Opportunity Supply : MLI supply is static/diminishing due to high build costs (relative to rents) and limited land availability. Demand : Structural change in demand for small business units driven by technology and the internet. Rental Growth : supply/demand imbalance resulting in strong annual rental growth Asset Pricing : Current marketing pricing for existing MLI investments is c. 50% of replacement cost value Platform : opportunity to increase efficiency and revenue by using emerging technology, scale and the serviced model 5
MLI Portfolio as at 30 September 2018 Current Passing Rent £12,424,129 £5.43 psf 2,634,279 861 sq ft Units Contractual Rent 1 £12,712,539 £5.56 psf Estimated Rental Value (ERV) at 100% occupancy £14,892,673 £5.65 psf 36 547 Assets Tenants Current Vacancy 2 169,911 sq ft 7.1% Capital value £181,415,000 £68 psf Notes: 1 Contractual rent includes contracted uplifts contained in existing leases over period of lease. 2 This excludes the vacant space at Coningsby Park, Peterborough which was purchased in December 2017 and is currently undergoing refurbishment and hence is not available to let. If this included then total vacancy is 361,680 sq ft, reflecting 13.7%. Geographic Breakdown by Passing Rent Tenant Business Breakdown* South Yorkshire Sole Trader/ Unclassified Other service activities West Midlands 7% 4% 3% South East 4% Administrative & Support services Wales 21% 10% Manufacturing 6% 13% Professional, Scientific & Technical East Midlands 4% 7% Real Estate Activity 4% East 7% Construction Information & Communication 12% 4% North West 20% Transportation & Storage 3% Scotland 16% Wholesale & Retail trade 33% West Yorkshire *As at February 2018 15% 6
The Pegasus Portfolio The Pegasus Portfolio Industrials portfolio incl. Pegasus 1,190 1,159,789 323 3,843,976 Units sq ft Units sq ft 20 272 832 56 Assets Tenants Tenants Assets Current Passing Rent £17,560,872 £5.12 psf Current Passing Rent £4,772,718 £4.35 psf Contractual Rent 1 £4,912,041 £4.48 psf Contractual Rent 1 £18,055,333 £5.26 psf Estimated Rental Value (ERV) at 100% occupancy £21,144,782 £5.50 psf Estimated Rental Value (ERV) at 100% occupancy £5,851,294 £5.05 psf Current Vacancy 2 63,826 sq ft 5.5% Current Vacancy 2 232,327 sq ft 6.5% Capital Value £249,302,000 £65 psf Capital Value £67,887,000 £59 psf South West South Yorkshire North East 1% South Yorkshire North East 4% 2% South East 6% 1% 7% West Midlands South East 8% 17% West Midlands 17% Wales 8% East Midlands 6% East Wales North West 5% 13% North West 29% 52% West Yorkshire East Midlands 10% Scotland 3% 11% Notes: 1 Contractual rent includes contracted uplifts contained in existing leases over period of lease. 2 Excludes vacant space at Coningsby Park, Peterborough which is currently undergoing refurbishment and hence is not available to let. 7
Multi-let industrial portfolio performance 6 months from 31 st March 2018 to 30 th September 2018 Contractual rent p.a. No of lettings 200,000 12 37 new lettings (£494k p.a. of rent) at an average 17% above previous Contractual Rent p.a. passing rent 180,000 Number of Lettings 10 160,000 16 lease renewals / regears (£231k p.a. of rent) at an average 12% ahead of 140,000 8 previous passing rent 120,000 100,000 6 80,000 The average letting / renewal is 3.2 years contractual term certain, with an 4 average rent free period granted of 1.3 months 60,000 40,000 2 20,000 As at 21st November 2018 there were 42 units under offer to let (£877k p.a. of rent) at an average rent of £6.13 psf ,0 0 No units let at or below ERV over the period The contractual rent on the 25 MLI estates purchased on 30 June 2017 increased by 4.5% in the 12-month period ending 30 September 2018 8
Update on MLI Platform Completion of 1 st phase of online leasing portal, 2 nd phase underway Technology Further rollout of VTS (leasing), Coyote (investment), Realla (marketing) and instruction of Engage (tenant portal) Removing friction from the leasing process. Leasing strategy New marketing materials, Smart Lease rollout, preparation of additional services Re-launch of industrials.co.uk Marketing Tenant survey Tenant referral scheme The purpose of these innovations is to minimise void Objective periods and to maximise efficiencies by reducing gross to net leakage 9
The MLI Market and Acquisition Criteria Multi-let Industrial Deal Flow Acquisition criteria Deal Volume (£M) No of deals Purpose-built industrial accommodation 1400 140 1200 120 Multi tenanted income profile 1000 100 800 80 Located within or close to areas of high population density 600 60 400 40 Accessible locations 200 20 Areas of strong economic activity 0 0 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 2015 2016 2017 2018 Acquisition below replacement cost value Deal volume No. of deals Acquisition target of c. £100m p.a. enables disciplined investment 10
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